Why Druckenmiller and the Pessimists are Wrong: Elderly Revenge
Stanley Druckenmiller is an icon in the investment world. His track record is unassailable. He is brilliant and has the track record to prove it. He is a billionaire. He is a pessimist. I am not either a billionaire or a pessimist. I think he is wrong about his prediction that the US and the world economy is heading towards a disastrous hard landing involving a massive and perhaps irrecoverable recession. In recent interviews, he carefully elucidates the stark realities that prevent him and pessimists from sleeping at night. He points out that entitlements in the US, and across the West, are too large to be met. He is right. Pensions are massively underfunded. Then again, I wrote about this problem back in 2016. Here we still are, though. Corporate profits are now at risk of a downturn. Fiscal policy has been reckless and central bank policy has been even more so. The eleven-year asset bubble is bursting. For the pessimists, it’s like a nuclear explosion that will raze not just the economy but the society that exists around it. For these pessimists, America and the West are heading into a painful reckoning and probably a social revolution. For me, America and the West are in a reckoning and a scientific, technological, and societal revolution that will bring advances, abundance, and the ability to solve many of the problems he cites. The creative destruction is destroying old paradigms but not yet giving us new ones that we can count on…..for now.
He is not wrong about these facts. The problem lies in his belief that the economic system is fixed and not susceptible to positive change. He assumes that humans will not change, cannot change, and will fight change given half a chance. Witness the fiery French persisting through tear gas, clashing with law enforcement in their riot gear barriers yet again. The assumption is that’s what the future holds for us all. That’s where we differ. All I see is change and adaptation. Lots of change. Druckenmiller sees a zero-sum game. I see a world where we can change the rules of the game. We both see a world where governments cannot adapt or change very easily. We differ when it comes to people and businesses. He sees the future through an analytical lens. I believe it requires an imaginal lens to escape the limits of otherwise accurate analysis.
Having just been down the Nile with an extraordinary group of entrepreneurs (with pretty much no wifi, hence my silence), I see why the lotus flower is revered from the Middle East to the Far East. Beauty always arises from murky, mucky, muddy messes. The Lotus is like the Phoenix symbol. Sometimes destruction must raze everything to nothing for renewal to start.
The entitlements problem is all too real. But, there are ways out. First, people will simply work longer. They are already postponing retirement. Fidelity’s data shows that the percentage of its clients who have enough savings to cover their retirement expenses is down by five percentage points since before COVID, “to 78%”. Not surprisingly, then, older people are returning to work or postponing retirement. Others are not retiring at all and instead creating a portfolio of cash and wealth-generating activities. Some will pay off; some won’t. But the trend is clear. The over 55’s are now the fastest growing component of the labour force according to The Bureau of Labour Statistics. They write, “Among people age 75 years and older, the labor force is expected to grow by 96.5 percent over the next decade.” Employers are loving this for many reasons. But, perhaps the single biggest reasons are 1. These Boomers bring a much-desired old-fashioned work ethic into the workplace and 2. They bring a wealth of experience that money cannot otherwise buy. These older workers are not in it for just the money either. They are seeking purpose, fulfilment and human connection. Employers find it easier to deliver on these requirements than it is to find more cash for higher wages.
I love the FT’s story of the 93-year-old “polylingual, well-connected non-executive director who spent his career running some of Europe’s biggest mail order clothing businesses” who is now “the oldest person on the payroll of David Nieper, a family-owned fashion business based in the Derbyshire town of Alfreton.” Textile making in this part of Britain goes back to the Industrial Revolution but it’s not where the young want to be. It is where the old are happy to stay. How much of the entitlements problem could be solved by old line industry and startups alike hiring oldies? What’s an oldie these days anyway? We’ve been saying 50 is the new 30 for at least a decade. Now popular culture is exploring the truly aged. At 85, Jane Fonda and Judy Dench have become cultural icons. Dench slammed being on the cover of British Vogue at 85 and Apo Whang -Od (amazing image here) has revolutionized the definition of beauty and made the ancient tradition of full-body Batok tattoos iconic by becoming the cover of Vogue Philippines at the age of 106 years. Martha Stewart has years of magazine covers ahead of her now. Fashion, as ever, is telling us a good deal about the future. Grey is the new cool.
Now, obviously, some won’t be able to work forever. These days, inflation is sharply dividing the health of the population. The wealthy can afford ever better healthcare with ever more modern approaches to detection and treatment. They can afford high-quality food. The poor, in contrast, are breaking down faster as inflation erodes the quality of their diets and healthcare. But, overall, the heft of the longer-working oldies will diminish the burden on the system.